April 2, 2014

Campaign Contribution Ruling

The U.S. Supreme Court lifted limits on the total amount of money people can give during one election cycle to political candidates. The court left intact the $5,200 limit that can be given to a particular candidate during a two-year election cycle. Dan Barr, a partner in the law firm Perkins Coie, will discuss the ruling.

Ted Simons: The U.S. Supreme Court today issued a major ruling on money in politics. The high court removed limits on the total amount of money an individual donor can give to an overall number of campaigns in an election cycle. The court did not change dollar limits to particular candidates. Here to explain is Dan Barr, a partner in the law firm of Perkins Coie. It's good to see you again. We needed you here to make sense of this.

Dan Barr: I don't know if I can do that, but I’ll help.

Ted Simons: You will, I know you will. Supreme Court, what did the court rule today?

Dan Barr: What the court did today is strike down the aggregate campaign limits. There are two types of campaign contribution limits. There's the individual limits, and individual limits you can give up to $2,600 per candidate per election. And then there's an aggregate limit, and the aggregate limit you could give up to $48,600 for all federal candidates in any particular election.

Ted Simons: So that base limit, I'm still limited in terms of giving to an individual campaign committee or candidate.

Dan Barr: Correct. But the difference is before today, you could only give the maximum amount to nine federal candidates. If you wanted to give to more than nine federal candidates, you couldn't give the maximum amount, at least any amount over nine. So the difference now is that the maximum amount that you could give before today to -- As many candidates as you wanted was $123,000. Now you can give the maximum amount to all the people running for the house and all the people running for the senate, and that's $3.5 million.

Ted Simons: Basically if my last name happens to be Koch, for example, and I have all this money, I can now spread this money out to as many -- Obviously each one is limited, but the overall number is--

Dan Barr: You can give to as many federal candidates as you want, and as a result you can give it 28 times as much money after today's ruling than could you before.

Ted Simons: Chief justice Roberts wrote that this -- The old limits were restricting first amendment rights. What did he mean by that?

Dan Barr: He said have you a first amendment right to give to as many candidates as you want to give. He said restricting the amount of people that you can give money to is like restricting a newspaper for how many people they can endorse for political office. And he says the first amendment gives you the right to donate money to however many people you want. If you want to donate to 12 federal candidates and you want to give them maximum amount you should be able to do that it.

Ted Simons: Sounds like they're also saying we are concerned about corruption and the appearance of corruption, that's why those base levels remain.

Dan Barr: Yes. But how you define corruption is another issue. Justice Roberts defines corruption as quid pro quo. This for that. This traditional, I'll give you $2,000 and you'll give me something back in return. You'll go light on regulating my company, or doing whatever. That's quid pro quo corruption. What Justice Briar who wrote the dissent said no, we're concerned with more of the appearance of corruption and the problem that money gives you preferred access. If you're able to give to everybody who's running for Congress, your phone call is going to get returned quicker than somebody who gives like $100 to some candidate. And what Justice Briar is concerned about, and the cases before today, the rights of the people who can't give that much money who get drowned out in the political process by people who have a lot of money and can control the message.

Ted Simons: Indeed, so basically what it seems like -- Correct me if I'm wrong -- The court is equating spending money with free speech. A. B, what about those who don't have the money?

Dan Barr: Well, as with a lot of things, how you ask the question determines the answer. And the way Chief Justice Roberts asked the question is, looking at the first amendment rights of individuals to give as much -- To give as many candidates as they can, and he's looking at the individual first amendment right. Justice Breyer is looking at the rights, the collective rights of people who don't have access to a lot of money and don't have access to political system, not to have their message drowned out by people who do have a lot of money. So Justice Breyer is looking at the first amendment rights of individuals, Chief Justice Roberts is looking at the rights of individuals, and Justice Breyer and the four dissenters are looking at the collective rights of people who don't have money and don't have access to the political system.

Ted Simons: So when critics say the wealthy now will just have that much more influence on elections, do they have a point?

Dan Barr: Well, that's certainly one way of looking at it. Another way of looking at it, it might not make that much difference. They're already giving a lot of money through independent expenditures, and maybe this way they'll be able to give money directly to these candidates instead of giving it to some i.e. that is going to gift money to the candidate anyway.

Ted Simons: I was going to bring that up, I saw it argued this could counter the influence of Super PACs and other ways of money -- Into the -- Gets into the system.

Dan Barr: One of the things that's been argued, it's a political matter, we'll see how it shakes out, is this decision gives say the Republican party more control over like the club for growth, and other independent expenditure groups and maybe even Tea Party groups and stuff because they'll be able to funnel more of the money to the party because you won't have this cap on contributions. But we'll see. We'll see how it plays out. That was one of the arguments, is that the Republican Party and the parties in general would have more control now over the independent expenditure groups.

Ted Simons: So can we say one headline from all this is that free speech trumps political corruption?

Dan Barr: Well, we'll see. How you define it, if you define political corruption as Charlie Keating, for instance, having access to all these people because he's donating a lot of money to them, even though it's not quid quo pro corruption, you should be concerned about this opinion. If you're not concerned about that and you think that someone like Charlie Keating should be -- Have the right to give as much to give to as many candidates as possible it's perfectly OK.

Ted Simons: Last question -- Were you surprised at all by the decision?

Dan Barr: No. Since Justice Alito replaced Sandra Day O'Connor on the Supreme Court, all five conservative justices have voted to strike down every campaign contribution, every campaign expenditure limit that's come before the court.

Ted Simons: I lied. This is my last question -- Citizens United, obviously a landmark decision. Does this come close to Citizens United?

Dan Barr: I don't think so, but it picks up from Citizens United. The strain that money is speech and it picks up the strain of knocking down McCain, fine gold and other finance restrictions. I think there's little doubt that with the current makeup of the court, that the individual contribution limitations will soon fall as well.

Ted Simons: Wow. All right. Good to have you here. Thanks for joining us.

Dan Barr: Thanks for having me.

Charles Keating

Charles Keating was a man who exemplified how money could influence politics. Keating has died in Phoenix at age 90. His association and political contributions to the so-called “Keating Five,” a group of lawmakers that included then Arizona Congressmen John McCain and Dennis DeConcini, helped him get favorable treatment from regulators. Keating’s Lincoln Savings and Loans collapsed, leaving many with worthless investments and costing taxpayers billions of dollars. Michael Manning was the lead counsel for the FDIC in prosecuting Keating, and will look back on his role.

Ted Simons: Charles Keating Jr. exemplified how money could influence politics. Keating admittedly hoped his campaign contributions would result in favorable treatment from elected officials. Keating built a financial empire that eventually collapsed, leaving many retirees with worthless investments and costing taxpayers billions of dollars. Michael Manning was the lead counsel for the FDIC in prosecuting Keating for wire and bankruptcy fraud. Goodness knows what else. Manning joins us to look back on the life of Charles Keating. Good to have you here.

Michael Manning: Good to be here.

Ted Simons: Who was Charles Keating?

Michael Manning: He was an interesting and complex guy. He was a lawyer from Ohio who moved out here, bought American Continental and Lincoln Savings. Lincoln savings only operated in southern California, but the headquarters was here in Phoenix. So he bought it in about '84, and shortly thereafter Congress deregulated S&Ls so they could make investments, risky investments and Charlie took that as a license to really go crazy. And he did.

Ted Simons: We should mention American Continental became a major home builder in the area.

Michael Manning: It was.

Ted Simons: And Dobson Ranch and other developments, these were Keating developments.

Michael Manning: The guy was a brilliant and charismatic man. No one could ever take that away from him. And had he stayed straight, and just played by the rules that everybody else played with, even bent them a little bit, but not broken them, he would have been one of our state's leading and most well-respected businessman.

Ted Simons: Before we go further, I want to go on that line. Why, then, did he decide to make the decisions he did?

Michael Manning: Well, he was unfortunately he was really affected by the Michael Milken era of excess. He went to the Predators’ Ball, he wanted to be like Mike. So the conspicuous consumption of Lincoln Continental and Charlie Keating really drove him to do deals that he shouldn't be doing.

Ted Simons: So back to the original formula here, how did the success with Continental and the initial success with Lincoln, how did that lead to this vast empire with Lincoln?

Michael Manning: Well, he moved away from his successful home building development enterprise and started doing these risky investments, and then he started doing them illegally. Back dating documents, providing loans to people without appropriate credit checks. So he took the money -- And it wasn't just investor money, it was also our money, it was tax dollars -- And really spewed that around in very high-risk investments.

Ted Simons: What were the first signs that Lincoln wasn't on the up and up?

Michael Manning: Well, the first sign were not evident to the regulators until about '88, because Charlie hired the best lawyers he could find and the best accountants, paid them by return mail premium fees, and they helped him cover up what was going on. So it wasn't evident to the regulators until 1988.

Ted Simons: And what made it evident?

Michael Manning: Well, they started finding irregularities in documents that just didn't make sense. That's when ultimately it closed 25 years ago this month. And the investigation ensued, and more and more was discovered. That's when we were brought in.

Ted Simons: How did Lincoln eventually fail?

Michael Manning: Well, Lincoln ultimately was -- The investors came in – I’m sorry, the bank examiners came in in 1988 and discovered that Lincoln had created a black hole of about $3.4 billion in losses. So once that was discovered, the litigation ensued.

Ted Simons: And so we got -- Costing taxpayers $3.4 -- Many of these investors, retirees. That's the heartbreaking aspect of this story.

Michael Manning: It is. And here's what would happen. Most of them were in southern California, most of them had federally insured C.D.s, and they would trundle up to the window and say, I'd like to renew my C.D. It's federally insured, what's -- What percentage are you paying? We're paying 3.8%. But we'll pay you 4.5% if you buy a Lincoln savings bond, and it's safer than federally insured. And those tellers and people selling knew better, knew they were junk bonds, and people lost their entire savings, mostly retirees.

Ted Simons: And yet we hear that Charlie Keating never had any regrets, never made any apologies. How? Explain that to me.

Michael Manning: Well, as I said at the opening of the interview, he was a very complex man. Not complex in all positive ways. He had a view of himself and of Lincoln Savings that he had a right to do this. He was the head -- He wasn't legally the head of Lincoln Savings, he was -- On purpose he didn't take an official role, but he puppet-stringed everybody else. He felt he had a right to raise this money in this way, right to make these investments, and that the regulators were wrong in criticizing what he was doing.

Ted Simons: Did he say the regulators were wrong in the sense they were criticizing, or that they were wrong in the sense they were emphasizing rules and laws that he thought just shouldn't exist?

Michael Manning: He completely disagreed with that. There was what was known as the direct investment rule, he wanted promulgated and pass so they could make more direct investments. He just took the position that the regulators' view of safety and soundness in banking was wrong. He knew what was best for Lincoln Savings, and he ought to be allowed to pursue all of the investments and loans he wanted to pursue.

Ted Simons: And at one point he managed to get some members of Congress to go to these regulators and intervene on his behalf. Tell us about the Keating Five.

Michael Manning: We became very much involved in the Keating Five issues early on in the investigation and the litigation we did. And Senator Cranston probably was the most culpable of the group. He was from California. Glenn, Ohio; Riegel, Michigan; and of course DeConcini and McCain, here. You know, McCain was probably the least culpable of that entire group. I don't think he knew what was going on, and there's an important story about that. That is, when the regulators came to him and said, okay, we think we've discovered some potential fraud back dated documents, he said, I'm out. And he got out and really upset Keating. But the money that Keating managed to contribute to politicians was again money from public coffers. It wasn't Keating money. It was money from public coffers.

Ted Simons: I remember during the time when the Phoenician was up and big there were stories that secretaries answering the phone were getting $100,000 a year, and everyone was like how wonderful until we realized that's our money.

Michael Manning: It was our money. Here's what would happen. You know the story about mother Teresa.

Ted Simons: Quickly.

Michael Manning: Okay very quickly, Charlie would loan -- Someone would come and say I won to borrow $30 million to build a project in Tucson. He said I'm going to lend you $30 million, I’m going to lend you $32 million, but you need to contribute $2 million back to me for politicians and causes that I favor.

Ted Simons: You obviously had a chance to deal with him on a variety of levels. To you, who was Charlie? We ask who Charlie Keating was, but who was he to you? How did he shape how you see people, how you do your job?

Michael Manning: Well, it was very tough piece of litigation. He always hired the most expensive, very qualified lawyers and accountants, and as I said, paid them by return mail. It was a good client for some of these people to have until things turned ugly. So to me, he was -- He really was emblematic of the culture of that period of time, of the fast run and gun savings and loan entrepreneurs.

Ted Simons: And with that in mind, would he be a character of this time as well, or is he just another face in the crowd considering the current climate?

Michael Manning: He would be a character in this era as well. He would be a Wall Street character for sure.

Ted Simons: Well, Michael, we thought of you immediately when we heard the story of Charlie Keating passing. Thank you so much for the information.

Ted Simons: The state house and senate continue to fight over a budget plan, this as the governor threatens to veto any bill sent to her desk before she gets a budget. Here with more in our weekly political update is Luige del Puerto, of the "Arizona Capitol Times." Good to see you. Sounds like things have hit the wall there at the capitol. What's going on?

Luige del Puerto: Things are crawling at this point. Not even crawling, they're not really going anywhere. The governor said yesterday, basically told legislators yesterday, don't send me anything until we've completed the budget. Both the speaker and senate president said yes, we get you, we're not sending anything until this budget is completed.

Ted Simons: It can't be completed until the house and senate can agree, right now they don't agree, do they?

Luige del Puerto: Well, it won't be completed until the house, the senate and the governor's office can agree on a budget. It's always those three branches, having to come together and decide what they want in this proposal. In terms of numbers, they're not very far apart. Just a couple million dollars. Separate, the senate budget from the house budget. However, there are crucial policy decisions within the senate budget that -- Let me backtrack. There are a couple policy decisions the governor and the house want that's not in the senate budget. And that's why we're seeing this kind of unusual dance, if you will.

Ted Simons: What are those policy decisions?

Luige del Puerto: For example, the governor is wanting full funding in that new agency that she wants to be created to deal with child welfare. In addition to that, the governor also wants a lot more money for the universities. The senate budget cuts some of that amount. And also there's issue of charter school conversion. The governor wants to see more funding for that, the senate has cut in half the funding provided to them in the house budget.

Ted Simons: I was going to say, the budget itself, just that money for that one-year reprieve was $33 million, which was contested somewhat. They've cut that in half as well. Was that done by necessity, was that done for other reasons? What's going on there?

Luige del Puerto: Clearly senate Andy Biggs -- Senate president Andy Biggs does not think it's right for the -- It's right for the districts to be creating charters. To him there's some philosophical objection to that. What we wants to do is not only cut that budget in half, but eliminate that budget for the next years.

Ted Simons: What about the $900,000 that John Kavanagh wanted to give to private prisons is that gone for good or just for now?

Luige del Puerto: Right now everything is in flux. We don't know if that comes back. Today he refused to concur in the changes that the senate has made, so what happens next is that the senate and the house will have to pick essentially three people in both ends and to come together and hammer out a budget deal. And we're presuming Kavanaguh would be somewhere there, because he was a sponsor of the house bills.

Ted Simons: So we've got house wanting this, the senate wanting that, is there any -- I know what you're going to say. Is there any opportunity that Democrats who are just not players in this at all, could they become players, or is this still a Republican issue that will have to be decided by Republicans?

Luige del Puerto: Right. I don't see Democrats getting involved in the budget discussions or getting a seat at the table, if you will, there. Are two reasons for that. One is that last year's -- Circumstances were clearly unique. We had a big fight over Medicaid expansion; the governor clearly wanted that so she cobbled something together. It's an election year. It's hard for me to see Republicans who are facing primary challenges approving a budget that is -- That has the backing of a couple Republicans and then Democrats.

Ted Simons: Any support of any democrat for a Republican primary would probably be poison there. Before we leave, speaking of Democrats, they're watching their counterparts having all sorts of trouble, and now they're having -- Some sort of leadership coup?

Luige del Puerto: One of the democratic senators wanted to clear the air if you will, there was rumors maybe he would vote for the senate's Republican budget. He wanted to say that that's not true and it turn in addition this -- It spiraled into what we saw yesterday, which is an attempt to remove the leaders, the democratic leaders and replace them. That near coup, almost coup, that actually failed, but it just goes to show you the troubles that we saw when they ousted their previous leader, some of those troubles remain. This is really a divided caucus.

Ted Simons: Basically what you've got is a bunch of Republicans can't figure out the budget, a bunch of Democrats can't figure out leadership and everyone is waiting for someone to blink.

Luige del Puerto: As Bruce Wheeler said today, they've lost their minds.